Wesfarmers pulls pin on online retailer after more than $400m of losses

Wesfarmers has called time on the loss-making online retailer it bought barely six years ago, opting to break Catch up after failed efforts to turn a profit.

The WA conglomerate on Tuesday said Catch would be “wound down” and its distribution centres in NSW and Victoria and its staff transferred to Wesfarmers’ other retail businesses, notably its Kmart and Target chains.

Wesfarmers will book “one-off” costs of up $60 million on the move, on top of Catch’s expected first-half loss of $38m to $40m before tax.

Catch has already recorded trading losses of nearly $400m under Wesfarmers before impairments and restructuring costs.

Chief executive Rob Scott, who guided Wesfarmers into the $230m purchase of Catch in 2019, conceded Catch’s financial performance had been “challenging”, but he insisted Wesfarmers had achieved its aim of gaining more expertise in e-commerce trading and data analytics.

“Since the acquisition of Catch in 2019, Wesfarmers’ retail divisions have significantly enhanced their data and digital operations, recording more than $3 billion in e-commerce sales and 220 million monthly digital interactions with customers in the 2024 financial year,” Mr Scott said.

However, he said that with the growth of global online retailers such as Amazon in recent years, Catch had battled to build the scale necessary to compete.

“Standalone, broad-based marketplaces require significant scale and traffic to achieve profitability,” Mr Scott said.

“International players are better able to leverage their global scale, networks and technologies compared to Australian-owned broad-based marketplaces.

“There has been a significant increase in competitive intensity in the Australian e-commerce sector, including from the entry and expansion of international competitors, which has impacted Catch’s ability to generate satisfactory returns over the long term.”

Wesfarmers shares were unchanged at $71.74 as at 7.25am.

Catch was bought from brothers Hezi and Gabriel Leibovich, who founded the business as Catch of the Day in 2006.

At the time of its 2019 deal, Mr Scott described the purchase as a unique opportunity for the conglomerate, which had chased expertise in digital, e-commerce and data analytics since he took the helm two years earlier.

Catch, which had flirted in 2018 with an initial public offer, had expanded on a model that saw it searching for suppliers wanting to offload unsold or distressed stock, which it then sold at heavily discounted prices.

However, the competition squeeze has seen its sales more than halve from a peak of $528m in 2021 to $227m last financial year, with cumulative pre-tax losses soaring to $400m. That includes $96m lost in the 12 months to last June.